Research on the Application of Good Faith in Fraudulent Transactions in Letters of Credit

In transactions using the letter of credit (L/C) payment method, beneficiaries can exploit the principle of independence and abstraction of L/C to commit fraud by forging the L/C. In actual court rulings, if the court acknowledges the occurrence of L/C fraud in a transaction, the payment for that transaction can be halted. However, not all instances of L/C fraud can apply the fraud rules. When a victim appeals to the court on grounds of L/C fraud, and if there is a bona fide third party, the payment should not be canceled and must continue. This is an exception to the application of the fraud rule in L/C. This thesis primarily focuses on studying the application issues of the exceptions to the L/C fraud rule in actual court rulings, analyzing the judgment conditions for “good faith.” Additionally, it provides defensive suggestions for banks, exporters, and importers to mitigate risks associated with the presence of bona fide third parties when selecting the L/C payment method.